Member question:

What is family office accounting?

Expert reply by RSM: 

Family office accounting brings business-grade financial discipline to the full financial life of a family’s broader family enterprise. Unlike a traditional accounting function that may serve a single business structure, family office accounting often spans an interconnected network of holding companies, operating businesses, investment vehicles, trusts, foundations, properties and personal accounts. Each may have different ownership, reporting, tax and governance requirements, yet all must ultimately contribute to a comprehensive view of the family’s financial position.

The foundation is the day-to-day accounting: bookkeeping, bill pay, expense management, payroll, account reconciliation and general ledger maintenance & management. However, the work often extends beyond traditional financial accounting. Depending on the family’s structure, estate plan and investment holdings, the office may need to maintain financial-statement, tax-basis, portfolio, partnership and fiduciary accounting records. These records may differ in purpose and methodology, making consistent data, clear policies and disciplined reconciliations essential.

Accurate accounting is only the starting point. Once the underlying information is reliable, the family office must translate it into reporting that supports decisions. To support that, families may need consolidated financial reporting across marketable securities, private equity, hedge funds, real estate, operating businesses, trusts and personal assets. Effective reporting should help answer practical questions:

• What is the family’s total financial position?
• How much money is being spent on family projects and initiatives?
• How are individual assets and managers performing?
• What is the tax basis of significant holdings?
• Where is wealth concentrated?
• What commitments and obligations are approaching?

Those questions naturally lead from historical reporting to forward-looking budgeting, cash flow forecasting and broader liquidity planning. Family wealth may be substantial but either illiquid or across various initiatives, entities and structures, with irregular distributions, capital calls, estimated tax payments, charitable commitments and significant operating or lifestyle expenditures. A family office therefore needs more than a current cash balance. It needs a coordinated view of expected cash inflows, outflows and available sources of liquidity so the family can make informed decisions and avoid surprises.

Delivering that information consistently requires the right operating model. Technology is an important consideration. Some family offices pursue an all-in-one platform, while others assemble best-of-breed systems for general ledger, portfolio accounting, partnership accounting, bill pay, tax data and consolidated reporting. An all-in-one system may simplify administration, while a best-of-breed environment may provide deeper functionality. Either approach can create challenges involving integration, data ownership, scalability and controls.

Talent is equally important. Professionals who understand accounting, complex investments, trusts, partnerships, tax data and family office operations can be difficult to find and retain. Families must therefore consider which capabilities should reside in-house and which may be better co-sourced or outsourced.

The objective is not simply accurate books. It is an accounting function that converts complex financial activity into timely, comprehensive and decision-ready information supporting tax planning, investment oversight, liquidity management and family governance.

RSM is a Founding Partner of the UNI Family Business Center.

the experts

Libby Hutton

Chris Dickson

Harris Moten

RSM's Family Office Services

Navigating the complexities of family wealth requires more than technical proficiency—it calls for a trusted advisor who can guide you through every stage of your journey, from creating and operating your family office to managing assets and sustaining your legacy.

Learn more about RSM's Family Office Services.